Rewards credit cards lure you in with the promise of sweet savings, but they could actually be costing you more than they reward you.
A whopping 37 per cent of Aussies say their cards are actually providing them with negative value, a new ME Bank study has revealed, which means it’s actually costing them money to maintain the cards than the rewards they’re reaping in return.
Related article: 4 Costliest Credit Card Mistakes
Related article: How to Simplify Your Money Management
Related article: A one-page plan to make busy people rich
According to the study, the most common (20 per cent) dollar benefit received each year was only “up to $50”, and cards that offered a little more bang for their buck were few and far between.
Only 14 per cent of cards offered $50 to $100 rewards; 11 per cent offered up to $200 rewards; and just 7 per cent offered up to $300 or over $500.
Over a third of rewards card holders didn’t even know what the dollar value of their card was, despite the same portion saying they have a credit card purely to benefit from the reward.
ME credit card specialist, Christopher Mak, said it was a worrying sign when one in three people don’t understand the value they’re getting from the card, putting the onus on banks to do better.
“Banks need to do a better job at offering products that are simple, fair and transparent to their customers,” said Mak.
The study revealed that, where costs had gone up due to the eroding dollar value of rewards, providers have passed these costs onto the consumer by reducing the value of the rewards or increasing fees.
And they’re not fooling consumers: 50 per cent of rewards card holders said they thought the dollar benefits of their card had changed or diminished since they first took out the card.
“Rewards on credit cards can be appealing, but be aware that you usually pay for them in some way – either through a fee or a higher interest rate,” Mak said.
Understand what you’re up for, and if you’re having trouble managing debt, you should question whether a rewards card is the right option for you.
“Take the time to find a card that best matches your needs.”
Make your money work with Yahoo Finance’s daily newsletter. Sign uphereand stay on top of the latest money, news and tech news.